Does Your Charity Qualify for 501(c)(3) Tax-Exemption?

You’ve been busy putting a lot of work into your charity and your community is improving by the day as a result! Now, it’s time to take the next big step and establish your charity as a tax-exempt organization with the IRS.

What Makes a Charity?
A charity, you may know, is an organization set up to provide help or raise money for those in need. Charities that can apply for 501(c)(3) tax-exempt status through the IRS are considered to be public charities. These charities typically include ones that

• -Are churches, hospitals, or are qualified medical research organizations associated with hospitals or schools
• -Have an active fundraising program and receive contributions from multiple sources
• -Receive income from activities related to or that further the organization’s exempt purpose(s)
• -Actively function in a supporting relationship to at least one existing public charity

How Do I Know If My Charity Qualifies for Tax-Exempt Status?
To qualify for 501(c)(3) tax-exempt status as a public charity, there are two key requirements:

1. 1. Your group must be organized as a corporation, trust, or unincorporated association. 
2. 2. Your group must permanently dedicate its assets to its exempt purposes while furthering one or more of those purposes, which must be stated in your organization document.

Basically, in order to qualify for tax-exempt status, your charity needs to be organized and operating solely for the exempt purposes outlined in your organization’s documentation. Nothing that the organization earns can go to a private shareholder or individual. Additionally, for 501(c)(3) tax-exempt status, your organization must not act for or as a political organization to influence legislation.

How Do I Apply for Tax-Exempt Status?
You can apply for 501(c)(3) tax-exempt status with the IRS by filing Form 1023, Application for Recognition of Exemption. And all applicants, unless otherwise directed by the application or IRS, must complete Parts I through XI of Form 1023 and include an additional schedules or attachments required. Once you’ve applied for 501(c)(3) status and the IRS has assessed your application, they’ll send you a letter telling you whether your application was approved and what your next steps as a tax-exempt organization are!

What Form Do I Need to File When My Charity is Tax-Exempt?
You are still required to report to the IRS each year some financial details, even as a tax-exempt status, to ensure your funds are still being used to further your tax-exempt purpose(s). Depending on your total gross receipts for the year, as a public charity you’ll file one of the following 990 Forms:

• -990 Long Form, filed by organizations that receive at least $200,000 in gross receipts or have total assets equalling or exceeding $500,000
• -990-EZ Form, filed by organizations that receive between $50,000 and $200,000 in gross receipts or whose total assets are fewer than $500,000
• -990-N Form, or the e-Postcard, filed by organizations that receive less than $50,000 in gross receipts

And if you’re at the point in your tax-exempt journey where you need to file Form 990, we can help! ExpressTaxExempt has helped e-file more than 100,000 990 Forms easily and efficiently! Click here to get started creating your very own account or contact our all-star, US-based support team to answer any nonprofit questions you may have!

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A Form 1023 Thanksgiving

The most common tradition for the Thanksgiving holiday is probably being around family and friends. While some of you may not have to travel too far, the rest of you might have to cross a great distance to be near those dear to your hearts. 

Whether you’re visiting for just a day, or you’re having one of those ol’ school, 5-day family get-togethers, you’re most likely planning out things before you take your trip, things like what dish you may have offered to bring, or things necessary for overnight stays. The point is that you’re preparing beforehand rather than just showing up with nothing at all.

Much like preparing for a trip, you can’t just dive-in head first to fill out a Form 1023 for tax exemption. You should have your organization’s records in order or else you’ll find yourself losing time going back and forth trying to find the correct information. Even if you do have your records organized, understand that you may still need to consult a tax professional when presenting your organization for tax exemption.

Imagine your mother’s or grandmother’s world famous turkey stuffing, if you can. Even though you brought all the ingredients for it, you probably still need her help to make it as tasty as you remember. But you still have everything to at least get started. With the Form 1023, the following documents are needed before you even begin to properly start the form:

What is Required to File Form 1023

• Employer Identification Number (EIN)
• Organizing Document (Article of Incorporation, Trust Agreement, or Articles of Association, Constitution, Bylaws or Other Similar Organizing Documents
• Section 501(c)(3) Purpose and Dissolution Clause Verification (Included in Organizing Document)
• Form 2848, Authorized Representative Verification (if applicable)
• Form 8821, Tax Information Authorization

Your EIN is used to identify a business entity, and it’s also known as a Federal Tax Identification Number. You can apply for an EIN online through the IRS website, but they stress having your organization legally formed before doing so. The Organizing Document states what your organization is, and establishes the purpose and how your organization works. To make it simple, your organization should be fully established before filing for tax-exemption.

If you have a tax professional, or a lawyer, whom you would like to represent on behalf of your organization to the IRS, an Authorized Representative Verification form is needed. If not, then it isn’t necessary. The Tax Information Authorization form grants permission for any individual, corporation, firm, organization, or partnership of your choosing to receive and inspect confidential tax information about your organization; this form is required under any circumstances. If you don’t have the information to complete that part, you won’t even qualify to complete a Form 1023.

It pays to be prepared whether you’re applying for tax-exempt status, or going to visit family for Thanksgiving. With ExpressTaxExempt, you can use our unique, streamlined e-filing features to complete a Form 1023. Once you’ve successfully filled out the application, you can print out your completed form and mail it to the IRS.

Our support team is thankful to be able to provide you with any assistance in regard to filing for tax-exemption or e-filing any one of our supported forms for exempt organizations. Feel free to give us a call Monday through Friday from 9 a.m. to 6 p.m. at (704) 839-2321. You can also email us 24/7 at support@expresstaxexempt.com, or chat with us at www.expresstaxexempt.com.

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27-Month Threshold

Time is always a factor in just about everything we do. You work for a number of hours throughout the day, you have a few hours for yourself or your family. You may have to be somewhere at a certain time, or you have to leave right at a certain hour. Things that have to get done, or activities that we would like to do, are often decided on how much time we have to do them. The same thing goes for taxes, or any federal forms for that matter. 

When filing for tax-exempt status, the IRS processes applications in the order they were received. But cases can be worked out of order sometimes. What’s important here is that how soon or late you apply for tax-exemption can determine when your organization actually receives its tax-exempt status.

So there’s this rule… this sort of 27-month rule that’s associated with section 501(c)(3) applications. Generally, your organization can be recognized as tax-exempt from the day it was officially formed. To receive that type of recognition date, you need to have your tax-exempt application filed, and accepted by the IRS, within 27 months after the end of the month your organization was formed.

Example: Your organization was officially formed on August 20, 2015. To get your exempt status to have to same date, your Form 1023 needs to be filed and accepted by the end of November 2017.

Now that’s a big chunk of time; it’s a little over two years. But don’t procrastinate. A lot can happen for a start-up organization within two years. You might not even decide to become tax-exempt until after a full year of operation.

“What happens if I file after 27 months?”

Nothing drastic or terrible will happen to your organization if you happen to file after 27 months. Your organization’s tax-exempt status will only be recognized after your actual filing date. However, there are exceptions depending on your organization filing late. For specific situations that mandate exception from the rule, contact your local tax professional or visit the IRS webpage.

Why wait a full two years when ExpressTaxExempt is your online solution to preparing your section 501(c)(3) application for tax exemption? Your information entered with ExpressTaxExempt is saved automatically, safely secured, and easily accessible at your leisure - anytime and anywhere. Our service also checks for any filing errors or mistakes so that your Form 1023 application can be complete and correct the first time around. Best of all, you can download and print your completed form as soon as you’re done.

Preparing your Form 1023 doesn’t have to be extremely hard. Our live team of expert professionals in Rock Hill, South Carolina are ready to help. Contact us by phone at (704) 839-2321; we’re available Monday through Friday from 9 a.m. to 6 p.m., Eastern Standard Time. You can also reach us by 24/7 email at support@expresstaxexempt.com, or by live chat at the ExpressTaxExempt website.

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Scare-Free Tax Season

They say it’s the most frightful time of year. No matter how hard you try, it’s impossible to avoid. And if things don’t go through as expected, you’re hit with probably the worst fear ever conceived by the human mind. No, we’re not talking about Halloween, but something most would consider even more sinister - Tax Season!! *cue lighting and thunderclap*

The thought of having to file tax forms could send a cold shiver down the spines of even the mightiest of men, or women. However, there’s no need for you to hold your breath like when walking past a cemetery at the stroke of midnight. As scary as filing taxes may be, you can conquer your tax filing fears with ExpressTaxExempt.

ExpressTaxExempt offers the quickest and simplest way to e-file your exempt organization tax return. We offer support for the following exempt tax forms:

• Form 990-N (e-Postcard) - For exempt organizations with less than $50,000 in gross receipts.
• Form 990-EZ - For exempt organizations with gross receipts over $50,000, but less than $200,000 and total assets less than $500,000.
• Form 990 (Long) - For exempt organizations with gross receipts equal to or greater than $200,000, and total assets equal to or greater than $500,000.
• Extension Form 8868 - An extension of time for exempt organizations; support is available for Part I and Part II.

And our newest service is so awesome, it’s like walking through a traditional, slasher horror film and coming out unscathed. With ExpressTaxExempt, you can now completely fill out a Form 1023 for tax-exempt recognition using the same highly-rated features including interview-style questioning, built-in error checking, accessibility with cloud computing, and, of course, our live, US-based technical support.

In a scary world full of ghouls, monsters, and taxes, let ExpressTaxExempt be that warm, comforting light that dispels the darkness. And while a scare-free Halloween may not be as welcoming as a scare-free tax season, the goal is to be well protected in both situations.

And just as there are many tips available on how to be safe on Halloween night, ExpressTaxExempt also offers a number of security protocols to keep your tax information secure. Our site is encrypted, McAfee secure certified, and protected by SSL (Secure Sockets Layer); your information goes strictly to the IRS and no one else.

Even the most enthusiastic Halloween fans go out with a group, and never alone; so don’t ever think that you have to face down these IRS tax-exempt forms by yourself. We have our live, US-based support teams located in Rock Hill, South Carolina that are more than happy to assist you. Give us a “howl” Monday through Friday at (704) 839-2321 from 9 a.m. to 6 p.m. We’re also available through email (support@expressextension.com) and live chat (www.expresstaxexempt.com).

ExpressTaxExempt wishes you all a safe and happy Halloween weekend!

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Section 501(c)(3) Applications

Even if you have a successful nonprofit operation going on within your community, you just can’t proclaim yourself as a tax-exempt organization. Like many other things leading to a classification or a title, there is a process that has to occur. Think about it… your nonprofit didn’t spring up overnight; it took a process and is probably still in progress. 

The success of your organization definitely is a process; one of the things you have to figure out is what works and what doesn’t work. To begin the process of becoming a tax-exempt organization, you have to complete and a file a section 501(c)(3) application.

A section 501(c)(3) application, also known as Form 1023, is required from organizations that are applying for exempt recognition from federal income tax. If your organization is approved, the IRS sends you written confirmation of your tax-exempt status, and its qualifications for tax-deductible, charitable contributions.

A Form 1023 is listed as the Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code. You can obtain tax exemption by filing a Form 1023. Your organization must follow the two key requirements in order to be exempt from federal income tax.

Requirement #1
Your organization must be organized as a corporation, trust, or an unincorporated association with documents specifying your purpose, and assets that are permanently dedicated to exempt purposes.

Requirement #2
Your organization must operate to fulfill one or more exempt purposes that’s listed in its documents.

If you’re tax-exempt under section 501(c)(3), you’re normally recognized as a charitable organization. And your organization will be classified further as either a public charity or a private foundation.

Make the process of becoming tax-exempt as quick and easy as possible by preparing your section 501(c)(3) application with the all-new service from ExpressTaxExempt. Your exempt application is filled with our simple “Q&A” format, reviewed by our automated error checks, and you can access your information at any time with our convenient cloud computing.

Once your Form 1023 has been completed, you can download and print your application to mail to the IRS. ExpressTaxExempt even has you covered if you need further assistance. Our live, support experts are available to help Monday through Friday from 9 a.m. to 6 p.m. EST. Give us a call at (704) 839-2321, or send us an email to support@expresstaxexempt.com. You can even live chat with us at www.expresstaxexempt.com.

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Unrelated Business Income Tax

When filing either a Form 990 (Long) or a Form 990-EZ, you’ll come across reporting any income that was received outside the normal activities of your organization. Even though your organization may be tax-exempt, income from unrelated business activity can be taxed at corporate income tax rates.

Before you try to discontinue any activities that could bring in taxed income, you should understand that tax-exempt organizations are allowed to participate in a regulated amount of business activities that are unrelated to its exempt purposes. Unrelated Business Income becomes taxable if it meets the following qualifications:

Income is From Trade or Business: Trade or business includes any activity done for the creation of income either from selling goods, or from the completion of services. Generally, the IRS sees it as any endeavor motivated by making a profit; therefore, unrelated business income tax can be broadly applied and could cover many activities done through your exempt organization.

Trade or Business is Regularly Carried On: “Regularly carried on” basically means how often and in what method the business is conducted. Even if your activity is not done year round, it could still be considered as “regularly carried on” if the activity is common to the frequency and method of for-profit organizations.

Example: If a for-profit company normally does an activity seasonally, and your exempt organization does that same or similar seasonal activity, then it would be classified as “regularly carried on.” On the other hand, something like a one-time only sale of property wouldn’t fall in this category.

Trade or Business isn’t Substantially Related: Of course, for any activity to be considered as unrelated business, it must not be substantially related to the main purpose of your exempt organization. Regulations state that business activities must essentially contribute to the execution of your exempt organization’s purpose. If not, it’s considered unrelated, and any income made can be taxed.

As with any other tax stipulations or rules, there are some exceptions and modifications. Contact your local tax professional if you find yourself in an unspecified situation with unrelated business income.

Important: Just because your exempt organization can participate in unrelated business activity doesn’t necessarily mean it always should. As mentioned earlier, authorization of unrelated activities should be limited. If operating an unrelated business becomes the primary purpose of your exempt organization, you would risk losing your tax-exempt status.

Report any Unrelated Business Income through your Form 990 or Form 990-EZ with Express990. We work closely with the IRS to provide you the most secure, easy, and accurate tax e-filing experience. Our servers are encrypted, McAfee secure certified, and protected by SSL (Secure Sockets Layer). Your information goes directly to the IRS and no one else.

For any assistance or questions about e-filing our available 990 forms, you can contact our live professionals by phone (704-839-2321, Monday through Friday from 9 a.m. to 6 p.m., Eastern Standard Time), by email (support@expresstaxexempt.com), or by live chat (www.expresstaxexempt.com).

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Find Your Tax Year Dates

One of the most common reasons we see a Form 990-N (e-Postcard) rejected is because of incorrect tax year periods. It’s a rejection with a fairly simple fix, but we understand why it happens, especially if you’re filing your organization’s tax return for the very first time. You may not be aware of your organization’s tax year period, also known as accounting period, or the fact that such a thing exists.

Usually, you would have to get in contact with the IRS Tax-Exempt Hotline to inquire about your exemption status, Employer Identification Number (EIN), and things of that nature. But the IRS also has what they call their EO Select Check; the “EO” stands for Exempt Organization. The page allows you to look up your tax-exempt organization and view whether you:

• Are eligible to receive tax-deductible, charitable contributions
• Were automatically revoked
• Have filed Form 990-N (e-Postcard)

If you been placed to file your exempt organization’s tax return for the first time, and you don’t happen to know your tax period, you should select the third option (Have Filed Form 990-N (e-Postcard)) and search using your organization’s EIN. If your organization has filed a Form 990-N (e-Postcard) before, you’ll see a list of each year it was filed. Click on your organization’s name, and it’ll show details about the filing. And at the very top, you’ll see the correct tax period for your organization.

For more information about the IRS EO Select Check, be sure to check out the following blog:

All About the EO Select Check

IMPORTANT: Keep in mind that there are two types of tax year periods, or accounting periods.

If your tax period is listed as from January 1 to December 31, then your organization operates on what is called a Calendar Tax Year; many exempt organizations have this type of tax year.
If your tax period begins or ends any date other than January 1 or December 31, like from October 1 to September 30 for instance, your tax period is considered as a Fiscal Tax Year.

Be sure to select the most appropriate tax year when e-filing a Form 990-N (e-Postcard), or any 990 form, for your organization.

For more information about accounting periods, you should consider reading

What Is A Fiscal Year?
What is an Accounting Period?

Once you know what your exempt organization’s tax period is, you can e-file your Form 990-N (e-Postcard) quickly and easily with Express990. Simply enter your organization’s details, select your tax period, indicate gross receipts are less than $50,000, authorize, and transmit to the IRS; it takes less than 10 minutes.

You can also e-file from anywhere you may be with our FREE Express990 App for iOS/Android tablets, or our mobile site designed for any web-enabled mobile phone.

For any questions or assistance with our e-filing service, feel free to contact our live, expert help at our headquarters in Rock Hill, South Carolina.
Phone: (704) 839-2321 (Monday - Friday, 9 a.m. - 6 p.m., Eastern Standard Time)
Email: support@expresstaxexempt.com
Live Chat: www.expresstaxexempt.com

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990-EZ | 990-N (e-Postcard) - Which to E-File?

There are a number of things that can genuinely confuse us all. You may think that you understand what you see or speak about, but actually you’re mistaking it for something else because of similarities between the two. And that’s fine—nobody is perfect. But the goal after making a mistake is learning from it, which reduces the risk of it being made again.

Lately, we, at Express990, are noticing that a large amount of people see “990-EZ” and mistake it for the 990-N (e-Postcard). Don’t let the “E’s” confuse you. These are two specific tax forms that follow two different sets of rules about how they are filed. Feel free to use this blog as a quick reference if you’re ever in doubt whether to e-file a Form 990-EZ or a Form 990-N (e-Postcard).

Form 990-N (e-Postcard)

• Exempt organizations that make less than $50,000 are required to file a Form 990-N (e-Postcard)
• A Form 990-N (e-Postcard) is due on 15th day of the 5th month after the end of your tax year
• You cannot file an extension for a Form 990-N (e-Postcard)
• There are no penalties for e-filing a Form 990-N (e-Postcard) late, which means you can basically e-file anytime throughout the year after your tax end date
• Failure to file a Form 990-N (e-Postcard) for three consecutive years will result in the loss of your tax-exempt status

Form 990-EZ

• Exempt organizations that have gross receipts less than $200,000 and total assets less than $500,000 are required to file a Form 990-EZ
• Filing a Form 990-EZ includes completing various schedule forms
• A Form 990-EZ is due on the 15th day of the 5th month after the end of your tax year
• You can e-file an Extension Form 8868 Part I to automatically extend your tax deadline by three months. (Example: If your Form 990-EZ is due on May 15, you can extend it to August 15)
• You can e-file an Extension Form 8868 Part II for an additional 3-month extension (Example: If you already extended your Form 990-EZ deadline to August 15, you can extend again to November 15)
• There are penalties for e-filing your Form 990-EZ late (For more information, check out 990 Penalties & How To Avoid Them)
• Failure to file a Form 990-EZ for three consecutive years will result in the loss of your tax-exempt status

As you can see, there are some similarities; however, there are even more specific differences that set these two tax forms apart. Another point you should keep in mind is that it’s more common to receive a notice about a Form 990-EZ than a Form 990-N (e-Postcard). You may receive a notice about an e-Postcard if you’re a couple of years behind.

You should also pay close attention to how the titles of these forms are written out. If you get a notice about an e-Postcard, it should be written out completely as “Form 990-N (e-Postcard).” If the notice is about another form, the title will be completely written out as well.

You can easily find out which tax form you need to e-file with Express990. Even if you accidentally choose the wrong form, once you put in the gross receipt amount, our program redirects you to the correct form. We work closely with the IRS to offer a safe, secure, and accurate e-filing process, backed by expert professionals, that will save you time and money.

For assistance with e-filing any of our available 990 forms, contact our live support by phone Monday through Friday from 9am to 6pm, Eastern Standard Time, at (704) 839-2321, by email at support@expresstaxexempt.com, or by live chat at the Express990 website.

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How Does An Organization Receive 501(c)(3) Status?

The Express990 team has been.... you know the title of this blog is just one of those questions that you don't want to read through a lengthy introduction to finally come to the answers. I've also been pondering this question, so let's just get right to it shall we...

What forms need to be filed?

There are two main types of forms an organization can file to get exempt status: Forms 1023 and 1024. 

• Form 1023 is exclusively for 501(c)(3) organizations and comes in various fashions. Form 1023, the largest of the 1023 series, is 26 pages long and includes 8 different schedules. Because of the complexity and length of this form, the IRS decided to make smaller versions. The i1023 is an online interactive version of the 1023 that has auto-calculated fields and help buttons. This form is then downloaded, printed out, and mailed in. Form 1023-EZ is for 501(c)(3) organizations that will have gross receipts of less than $50,000 and total assets of less than $250,000. The 1023-EZ is only 3 pages long but still requires the same $400 filing fee that is consistent for all of the applications.

• Form 1024 is for all other organizations other than Section 501(c)(3). Most of these organizations can self-declare their tax-exempt status, but must still file a Form 990. If an organization of this type has its exempt status revoke, it must file a Form 1024 to be reinstated. The only exceptions are Sections 501(c)(9) and 501(c)(17) organizations, as these cannot self-declare. There are 11 schedules connected with the Form 1024, but only one schedule will be used with each type of organization filing.

What are the all the steps to receiving 501(c)(3) Status?

Filing for tax-exempt status can seem like a daunting task, but if you keep your ducks in a row, it won’t be nearly as stressful. First things first: do your homework. Make sure you have all the information and paperwork you need before submitting your organization to the IRS. You don’t want to have your application become stuck in limbo because you forgot one initial on one page. In the end, you don’t want your exempt status to come down to hope, trust, and pixie dust.

There are four forms that an organization can use to apply for exempt status: Forms 1023, i1023, 1023-EZ, and 1024. The first 3 are variations for just section 501(c)(3) status applications. Form 1024 is for all other section 501(c)s, though most organizations that fall into these sections can simply self-declare. Exceptions to this rule would be sections 501(c)(9) and 501(c)(17), which cannot self-declare.

The Form i1023 is an online version of the full Form 1023, which is 26 pages and 8 schedules long. The Form 1023-EZ, on the other hand, is only 3 pages long but is reserved for those 501(c)(3) organizations with under $50,000 in annual gross receipts and less than $250,000 in total assets. Both the 1023 and 1023-EZ require the same $400 filing and processing fee.

How does an organization maintain their exempt status?

One of the best ways to maintain your exempt status is to file your Form 990 return every year on the date specified by your fiscal calendar. The majority of organizations lose their exempt status simply because they did not file for more than three consecutive years.

For audit and record purposes, you want to keep a copy of every IRS document. Record retention is determined by the needs and wants of the organization. Many nonprofits, particularly those engaged in providing heath-care services or those serving minor children, are subject to retention requirements that are specific to, or prudent for, the services they provide. 

Overall, receiving 501(c)(3) Status doesn't seem too difficult. Decide which form you need to file, the 1023 or the 1024. Then enter in some business information pay a filing/processing fee, wait a non-specified amount of time (I'm hoping within a day-fingers crossed), and {poof} 501(c)(3) Status received. I'm happy to see an online version of the 1023 (known as the i1023), because paper filing is a bit old fashioned and time consuming. For more information on 501(c)(3) status check out these blogs:

What Can Cause Your Tax-Exempt Status To Be Revoke?

How To Reinstate Tax-Exempt Status

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